Central Banks, Financial Regulators, and the Quest for Financial Stability: 2011 IMF Annual Research Conference


By Olivier Blanchard

The global financial crisis gave economists pause for thought about what should be the future of macroeconomic policy. We have devoted much of our thinking to this issue these past three years, including how the many policy instruments work together.

The interactions between monetary and macroprudential policies, in particular, remain hotly debated. And this year’s IMF Annual Research Conference is an important opportunity to take that debate another step forward.

Looking back, it is striking how many papers from last year’s conference—on post-crisis macroeconomic and financial policies—have been so immediately relevant to events on the ground. Just to give you an example: the paper on fiscal space is obviously front and center in the policy debate on the European sovereign crisis, the United States’ budget, and challenges faced by advanced country governments more generally.

This year’s topic—monetary and macroprudential policies—is equally relevant. It goes to the core of central banks’ mandates, and their role in achieving macroeconomic and financial stability. The financial crisis triggered a fundamental rethinking of these issues, but much research, both conceptual and empirical, remains to be done. The conference provides an excellent opportunity to engage with prominent academics, policymakers and private sector practitioners. I hope the conference will contribute to expanding the frontier of knowledge on this topic. Continue reading

Unwinding Public Interventions in the Financial Sector


By José Viñals

The IMF held a high-level conference last week on unwinding public interventions in the financial sector. Insightful discussions took place among policymakers, academics, and the private sector, highlighting several areas where a broad consensus appears to be emerging, as well as some challenges that policymakers are about to face.

Converging views

There was broad agreement that an exit strategy from monetary, fiscal, and financial sector interventions is essential. The pivotal goal of this exit process would be to arrive at a condition of price stability, fiscal sustainability, and financial stability, including a new financial landscape that is much safer than currently exists. This will provide the necessary underpinnings for stable, strong, and balanced growth.

It will be relatively easy to unwind financial interventions that have sunset clauses or have penal rates so they become unattractive as market conditions normalize (photo: Sajjad Hussain/AFP/Getty Images)

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